There have been repeated problems with Pay Pal properly processing payments with regard to domain registrations, and for this reason (and since registrations must be paid for in "real time") Pay Pal can no longer be used to make registration payments.
Many have found they can "work around" this by making a Pay Pal payment to their general account in the amount of any balance owed plus at least the cost of registrations they want to make.
This leaves a "credit balance" on the account sufficient to proceed with the registration(s), and then the during the registration process, the registration fee amount is just deducted from the credit balance on the account.
I realize this is an extra step, but it is the only way at present to use Pay Pal to pay for a registration.
--DreamHost Tech Support